PBOC Loosens Capital Requirements for Certain Banks to Boost Lending

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The Chinese central bank has relaxed capital requirements for certain lenders in order to support credit supply amidst escalating Sino-US trade tensions, according to sources who spoke to Bloomberg.

The sources said that the People’s Bank of China (PBOC) issued notices to certain unnamed Chinese lenders informing them of a 0.5 point reduction in the “structural parameter” for the monitoring of balance sheets as part of Macro-prudential Assessments (MPA).

PBOC conducts MPA’s on a quarterly basis in order to determine risk levels in the financial system, with the structural parameter currently standing at 1.0.

According to the sources the purpose of the move is to enable regional financial institutions to better satisfy credit demand, as worsening Sino-US trade tensions cast a shadow over China’s upcoming economic health.

Beijing has already unveiled a range of measures to shore up the health of the Chinese economy should Sino-US trade relations continue to degrade, including the release of over 1.4 trillion in liquidity since the start of July, as well as plans for more active fiscal policy in the second half of 2018.

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